Why do we invest in transportation infrastructure and when does it work?

Appalachian Development Highway System

By Taylor Jaworski, Queen’s University

Calls for renewed infrastructure investment have been prominent issues in recent election cycles in the United States and Canada. Bernie Sanders called for $1 trillion in spending compared with $48 billion in President Obama’s first term and a proposed $73 billion to end his second term. Here in Canada, Prime Minister Justin Trudeau promised an additional $60 billion in new infrastructure spending. These proposals have received the endorsement of many economists, including Larry Summers in a recent Washington Post op-ed and Paul Krugman in the New York Times earlier this year.

Crucially, policymakers need to clarify the objectives of infrastructure spending. On the one hand, is the goal to provide short- or medium-run stimulus to ailing economies? If so, then knowing the magnitude of the fiscal multiplier is essential. A survey and more recent work on the fiscal multiplier by Valerie Ramey of UC-San Diego is available here, here, and here. On the other hand, is the goal to take advantage of historically low interest rates and use improvements in transportation infrastructure to promote long-run economic growth? In this case, economic history together with recent advances in empirical economics can provide a window into the long-run benefits of investment in new highways, bridges, and rail infrastructure.Read More »

Doctoral Fellow develops methods to better understand regional recessions

sergei2Zooming-in without losing focus – understanding regional recessions and the importance of spatial interactions

By Sergei Shibaev, JDI Student Fellow, Queen’s University

Here is the scenario – you are an interested party (e.g. regional policy maker or researcher) in a small regional division in Canada (e.g. Central Okanagan Regional District of British Columbia).  You need to know if your region is likely to become economically at-risk or potentially distressed separately from the national economy, and to do so you require an informative assessment of any synchronicities (i.e. co-movements) with other regions in the country regarding how your small region’s economy has evolved in the last decade. Furthermore, you have existing knowledge regarding several types of connections to other regions that you know are important for your local economy (e.g. your largest regional trading partners), and you wish to explore and compare them through time. I develop and investigate a tool that is capable of learning by itself about these types of phenomena in a unified framework that collectively models a large number of small regions in a country.Read More »